Energy and carbon prices rose across the board on Thursday after the public holidays on New Year’s Day that meant some markets were closed. Several benchmarks reached notable highs – among them TTF natural gas in Europe, Brent crude oil and European carbon dioxide emissions allowances.
The February TTF natural contract extended a climb that began in mid-December, and which has seen the month-ahead price rise by around a quarter. This was effectively a fortnight countdown to the cessation of Russian pipeline gas supply through Ukraine.
TTF closed up 2.0%, from USD 14.83/MMBtu on New Year’s Eve to USD 15.12/MMBtu (EUR 50.27/MWh). In local currency, it was the first close above EUR 50/MWh in well over a year. TTF was back below that threshold in early trading on Friday.
NBP has been moving in tandem with TTF, as it usually does because of the strong physical connections between the two markets. It closed up 1.6%, from USD 15.26/MMBtu on New Year’s Eve to USD 15.50/MMBtu. NBP continues to trade at a premium to TTF.
Along with the Russian gas situation, upward pressures on European gas prices include colder weather in North-West Europe and the rapid decline in gas storage levels in recent weeks.
European Union storage is now down to 71.8% full, according to data from Gas Infrastructure Europe, and at current withdrawal rates this could fall to around 60% by the end of January. As ever, much will depend on how severe winter turns out to be.
In Asia, the JKM LNG benchmark rose by 1.0%, from USD 14.24/MMBtu to USD 14.38/MMBtu, widening the negative TTF-JKM spread to minus USD 0.74/MMBtu. This means Europe is now a more attractive market than Asia for uncommitted cargoes, subject to shipping costs.
US natural gas prices took a break from recent wild swings. The February Henry Hub futures contract rose by just 0.7%, from USD 3.63/MMBtu to USD 3.66/MMBtu.
Forecasts predict that much of the US faces weeks of freezing weather, which would put downward pressure on storage levels and upward pressure on prices.
The Energy Information Administration’s weekly gas storage report, usually released on a Thursday, will be out later today because of the holidays. The report released on 27 December, when Pricewatch was taking a festive break, showed yet another large withdrawal, of 93 Bcf, and was one of the factors in Henry Hub jumping to almost USD 4/MMBtu as the year came to an end.
Crude oil prices showed signs of breaking out of the rangebound trading pattern of recent weeks.
The March Brent futures contract closed above USD 75/barrel for the first time since November, at USD 75.93/barrel – a 1.7% rise on the closing price of USD 74.64/barrel on New Year’s Eve. WTI was up 2.0%, from USD 71.72/barrel to USD 73.13/barrel.
Brent reached a high of USD 76.25/barrel in early trading on Monday, before retreating back below USD 76/barrel.
European carbon prices soared yesterday, continuing a steep climb that began in mid-December, when the price of EU carbon dioxide emissions allowances was at around EUR 63/tonne. Yesterday they closed at USD 73.33/tonne, up 4.5% from USD 70.15/tonne.
A key driver has been the trajectory of European natural gas prices. Coal prices, by contrast, have been remarkably stable in recent weeks, with API2 at around USD 4.50/MMBtu. Yesterday it closed at USD 4.58/MMBtu.
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WTI, NBP, TTF and EU CO2 data from ICE. Henry Hub, JKM and API2 data from CME. Prices in USD/MMBtu based on exchange rates at last market close. All monetary values rounded to nearest whole cent/penny. Text and graphic copyright © Gas Strategies, all rights.
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